Problem Definition
Your client, Fysikum, is an operator of squash centres in Sweden. The squash centres include sauna, spa, pool, gym and of course the squash courts. Due to the extreme success in Sweden the company is considering expanding to other countries of Europe, in particular Germany.
Therefore they asked us to evaluate this possible expansion.
Comments
This case is made to be interviewer-led. Therefore the interviewer should guide the interviewee through the interview.
The case is split into two parts.
The first part describes more qualitative problems and has more open questions that should make the interviewee think about the problem and its solution.
The second part is more about quantitative problems and calculations. Here the interviewee should try to make his own calculations and solve the questions.
The questions in the big boxes should be read out and shared with the candidate.
Short Solution (Expand)
Detailed Solution
The following framework/structure provides an overview of the case:
I. Background
1. What kind of information would you need in order to estimate the outcomes of this expansion?
This question should give an overview of the candidate’s ability to structure an answer. The best way to solve this is by using a “3C’s” or “Porter’s Five Forces” analysis.
The interviewee should give the candidate a short period of time for brainstorming.
The answer should include some of the following points:
2. How would you gather the needed information you just mentioned?
Good answers
- Purchase marketing analyses / research reports
- Internet research on competitors
- Contact real estate agent for real estate costs
Outstanding answer
- Contacting someone in the consulting company who has experience in the market or industry
This should be emphasized, as this point will make the candidate come across as “somebody from the team” and will make it easier for the interviewer to consider working with the interviewee.
II. Cost
3. Can you determine the minimum annual membership fee Fysikum has to charge in order to cover the running cost?
- If the candidate asks about the revenues, tell him/her that they are equal to the annual costs.
- Courts are always used during operating hours.
- The candidate should think about the possibility of doubles. If he asks he should assume 50% single and 50% double matches.
The calculation should look like the following:
# of players per court & hour (average)
Hours played per week & court
# of members per court & week
Total # of members
Cost per member and year
4. Are you sure that this is an annual membership fee and not a weekly charge?
This is meant to be a tricky question to show the confidence of the interviewee. But as the annual costs are divided by the total number of members this is indeed an annual fee.
III. Competitors
5. The dominant market player for squash centres (60% market share in Germany) offers memberships for €50. Would you recommend entering the market?
Good answer
Further investigation is required, in particular what the competitor is offering and if Fysikum can differentiate its services from this offering.
For instance if the competitor is using a cost leadership strategy and offers a very cheap, but low quality service, Fysikum could launch a premium, high quality squash centre.
Outstanding answer
There could be other outcomes of the investigation.
If the competitor operates across all segments, from low-end to high quality, and has a lower cost base, Fysikum should not enter the market. An entrance would only lead to a price competition that our client cannot win.
IV. Conclusion
6. If you have to report to the CEO right now, what would you tell him/her?
Conclusion
- In order to make no loss, Fysikum would need to charge more than €90 per member.
- The client should only enter the market if there is a possibility to differentiate from the dominant competitor.
- Other issues, mentioned at question 1 should also be considered.
Difficult Questions
What other possibilities are there to differentiate the offered service compared to the competitor?
There are several possible solutions (some mentioned at the beginning of the case):
- Providing high-quality courses
- Setting up cross-country tournaments between Sweden and Germany
- Advertise the squash centre with famous people (celebrities)
- Offer longer opening-hours for members paying a higher fee
- Offer services like a café or a bar
More questions to be added by you, interviewer!
At the end of the case, you will have the opportunity to suggest challenging questions about this case (to be asked for instance if the next interviewees solve the case very fast).
